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Will rental income count as additional income for 2nd mortgage

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  • 24-04-2019 11:18am
    #1
    CandyButcher
    Registered Users Posts: 115 ✭✭


    Anyone know when getting a mortgage for a second property will they take your rental income from the first property into consideration ?


    When the mortgage calculator asks existing monthly commitments and I put in 1000e which is my mortgage, the amount the lender will loan me and my partner drops significantly, so I am wondering can I counter that by entering 1000 under the non guaranteed income section?


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    #2
    L1011
    Moderators, Business & Finance Moderators, Motoring & Transport Moderators, Society & Culture Moderators Posts: 67,854 Mod ✭✭✭✭L1011


    You need to talk to either humans in the lenders or a broker about this, the online calculators are not designed for this and are not going to give any useful results.

    Rental income can count but there are multiple factors to take in to account. There'll be significant tax to be paid on the rental income which has to be taken in to account for starters; also the BTL LTV% will need to be met on the rental property


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    #3
    Fol20
    Registered Users Posts: 3,624 ✭✭✭Fol20


    All banks are different. Some will disregard it, some may take 50pc of the income etc. best bet is to talk to broker and keep all options open. Finance ireland and ICS might be worth a look if your hoping to use more of the rental income if the big name banks are not offering what you want. Keep an eye on the interest rate though


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    #4
    limnam
    Registered Users Posts: 9,152 ✭✭✭limnam


    CandyButcher wrote: »
    Anyone know when getting a mortgage for a second property will they take your rental income from the first property into consideration ?


    When the mortgage calculator asks existing monthly commitments and I put in 1000e which is my mortgage, the amount the lender will loan me and my partner drops significantly, so I am wondering can I counter that by entering 1000 under the non guaranteed income section?


    As mentioned each bank will look at it differently.


    Or maybe go to a broker.


    Generally if you're not selling the existing home it will have a drastic impact on the amount you can borrow.


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    #5
    CandyButcher
    Registered Users Posts: 115 ✭✭CandyButcher


    Thanks for the straight answers folks!


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    #6
    Gumbo
    Moderators, Society & Culture Moderators Posts: 38,554 Mod ✭✭✭✭Gumbo


    UB allowed 80% of my rental income to be used when getting an additional mortgage a couple of years back.


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    #7
    CandyButcher
    Registered Users Posts: 115 ✭✭CandyButcher


    That is good to know. Where did you live while you rented out your initial property if you don't mind me asking ? I was thinking of using the rent a room scheme to allow 14,000 while I get my second mortgage, as If I just rent my property out completely I would have nowhere to live myself but would they accept that too im wondering.


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    #8
    Fol20
    Registered Users Posts: 3,624 ✭✭✭Fol20


    CandyButcher wrote: »
    That is good to know. Where did you live while you rented out your initial property if you don't mind me asking ? I was thinking of using the rent a room scheme to allow 14,000 while I get my second mortgage, as If I just rent my property out completely I would have nowhere to live myself but would they accept that too im wondering.

    I could be wrong but they may not include this.


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    #9
    L1011
    Moderators, Business & Finance Moderators, Motoring & Transport Moderators, Society & Culture Moderators Posts: 67,854 Mod ✭✭✭✭L1011


    Rent-a-room won't be counted, hasn't been since it was widely (ab)used by people in the last boom. Often brokers told people to add it down whether they were going to do it or not!


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    #10
    Gumbo
    Moderators, Society & Culture Moderators Posts: 38,554 Mod ✭✭✭✭Gumbo


    CandyButcher wrote: »
    That is good to know. Where did you live while you rented out your initial property if you don't mind me asking ? I was thinking of using the rent a room scheme to allow 14,000 while I get my second mortgage, as If I just rent my property out completely I would have nowhere to live myself but would they accept that too im wondering.

    They will not allow the Rent a Room. You have to provide a copy of the lease in everything for the rented property.

    I moved out and into my grandmothers while refurbing the new (older) house.


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    #11
    Samuel T. Cogley
    Registered Users Posts: 10,684 ✭✭✭✭Samuel T. Cogley


    Similarly KBC took at least a portion of my (expected at that point) rental income into account.

    Landlording is a mugs game though at the moment.


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    #12
    CandyButcher
    Registered Users Posts: 115 ✭✭CandyButcher


    Samuel T. Cogley wrote: »

    Landlording is a mugs game though at the moment.


    Do people agree with this statement ? I know the tax is high and at best probably allows you to just have the mortgage paid..



    The only ridiculous thing about landlording from what I can see is the length of time it can take to evict somebody if they decide they don't want to pay you rent. Is a good way around this to use a "Tenancy at will" agreement with a tenant, that way any messing with rent and you can evict them alot sooner


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    #13
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    CandyButcher wrote: »
    Is a good way around this to use a "Tenancy at will" agreement with a tenant, that way any messing with rent and you can evict them alot sooner

    No agreement can take away the statutory rights a tenant has whatever you label it.

    i.e. the tenant will still be entitled to the same notice periods, security, RTB, renewals, Part 4 rights etc etc etc....


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    #14
    Fol20
    Registered Users Posts: 3,624 ✭✭✭Fol20


    CandyButcher wrote: »
    Do people agree with this statement ? I know the tax is high and at best probably allows you to just have the mortgage paid..



    The only ridiculous thing about landlording from what I can see is the length of time it can take to evict somebody if they decide they don't want to pay you rent. Is a good way around this to use a "Tenancy at will" agreement with a tenant, that way any messing with rent and you can evict them alot sooner

    For a single property, yes its a mugs game. You have too much of your cashflow in one property where one bad tenant could cause your rental income for years to be eaten up(rent arrears of circa 1 year, repair and legal costs of circa 1year maybe more). Its very risky and then at the same time when you do make profit of maybe 3-5k your taxed on it @50pc followed by capital gains of 33pc.


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    #15
    CandyButcher
    Registered Users Posts: 115 ✭✭CandyButcher


    Would renting out each room individually be a better way to mitigate that risk of loss of all rental income by one bad tenant


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    #16
    Fol20
    Registered Users Posts: 3,624 ✭✭✭Fol20


    CandyButcher wrote: »
    Would renting out each room individually be a better way to mitigate that risk of loss of all rental income by one bad tenant

    It can mitigate risk however there is more work involved with this and this also brings its own problems in the form of extra costs and RTB registration. If you have one awkward tenant, it might cause other tenants to leave. You would be surprised at what some tenants live under and what they expect.


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    #17
    pwurple
    Closed Accounts Posts: 12,449 ✭✭✭✭pwurple


    CandyButcher wrote: »
    Do people agree with this statement ? I know the tax is high and at best probably allows you to just have the mortgage paid..



    The only ridiculous thing about landlording from what I can see is the length of time it can take to evict somebody if they decide they don't want to pay you rent. Is a good way around this to use a "Tenancy at will" agreement with a tenant, that way any messing with rent and you can evict them alot sooner

    Oh there are a few other ridiculous things beyond tenants not paying rent, don't worry. :)

    Rent freezing. The government has started a dangerous game of setting rents. No idea when they will decide to reduce your rent, lock your rent, bring on the next rule.

    Taxation The rules on this have been tinkered with as well. Rental income is a weird half-way house category of it's own. It doesn't count as income from a business, even though it is. You can't claim legitimate expenses of rental as expenses. It is taxed kinda as if it is PAYE/PRSI, but you don't get the social benefits from it...

    The Public Tenants can be great, but like any role dealing with the public, you get some tenants who are infants (don't know how to change a lightbulb or hoover bag), or who cause trouble for neighbours.

    Damage Your property can be completely destroyed. Walls knocked, ****ty tiles laid, holes dug in the garden, utilities disrupted, roof insulation stripped out and sold, copper pipework pulled out of walls.

    Criminal activity You can get into a right mess with the guards. Dragged through the courts because your premises was used as a brothel, as a drug den etc.

    Additional cost and overheads Landlord insurance, property maintenance (far higher from tenants than owners), letting costs, accountancy fees, solicitor fees for tenancy agreements etc.


    Basically, for one property, it's generally more cost and overhead than income.


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    #18
    4ensic15
    Banned (with Prison Access) Posts: 4,691 ✭✭✭4ensic15


    CandyButcher wrote: »
    Do people agree with this statement ? I know the tax is high and at best probably allows you to just have the mortgage paid..



    The only ridiculous thing about landlording from what I can see is the length of time it can take to evict somebody if they decide they don't want to pay you rent. Is a good way around this to use a "Tenancy at will" agreement with a tenant, that way any messing with rent and you can evict them alot sooner

    That is not a way around it. Most such attempts to get around it have backfired with nasty financial consequences for the landlord.


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